As the UK Government looks to secure new global trade deals in the wake of Brexit, one industry that could see significant benefits is Scotch whisky.
A recent trade deal between the UK and India could pave the way for a golden era for Scotch whisky exports, with tariffs on exports to India set to be slashed by up to 150%. This presents a huge opportunity for producers in Scotland, who currently export around £430 million worth of whisky to India each year. In this article, we’ll take a look at the potential benefits of this golden trade deal for Scotch whisky producers.
What are the specifics of the deal?
In January 2022, International Trade Secretary Anne-Marie Trevelyan and Indian Minister of Commerce and Industry, Piyush Goyal, launched negotiations on a free trade agreement that could see tariffs on Scotch whisky exports to India slashed.
Mark Kent, Chief Executive of the Scotch Whisky Association, is quoted as saying:
“Launching UK/India trade talks offers a golden opportunity to reach an ambitious tariff reduction in an early harvest deal that could grow Scotch Whisky exports to India by £1 billion over five years. Tackling the tariff and State level regulatory issues would open the market up to smaller producers who are effectively locked out by the substantial barriers to trade.”
India is home to 1.4 billion consumers and is the world’s second-most populous country.
In 2019, Scotch whisky exports to India were worth £153 million – a decrease of 15% from 2018.
The UK-India free trade agreement could provide a much-needed boost to the Scotch whisky industry, which has been hit hard by the Covid-19 pandemic. Scotch whisky is currently subject to a 150% import tariff in India, as well as a series of other state-level taxes and regulations. If these barriers to trade were removed, it would provide a huge opportunity for Scotch whisky producers, particularly smaller businesses that are struggling to compete in the current market.
The UK Government has said that it is committed to reducing these barriers in the UK-India free trade agreement, which is currently being negotiated. The Scotch Whisky Association has called on the UK Government to ensure that Scotch whisky is given “priority status” in the negotiations. Given the huge potential market for Scotch whisky in India, this is a golden opportunity for the industry that should not be missed.
How big is the Indian market for Scotch whisky?
Currently, India is the second-largest export market for Scotch whisky, with exports totaling £355 million in 2019.However, due to high tariffs, only a small percentage of the whisky consumed in India is actually Scotch whisky. In fact, only around 12% of the whisky drunk in India is Scotch, compared to 70% of locally produced spirits.
If the UK and India were to agree on a free trade deal, it would open up the Indian market for Scotch whisky producers and could lead to a significant increase in exports. The UK Government has already said that it wants to cut tariffs on Scotch whisky imports into India as part of any future trade deal. This is great news for the Scotch whisky industry, as it would provide a much-needed boost to exports. The Scotch Whisky Association has said that a free trade deal between the UK and India could be worth up to £1 billion to the Scotch whisky industry.
What are the potential benefits of this trade agreement?
There are a number of potential benefits of a free trade agreement between the UK and India for Scotch whisky producers.
- Elimination of tariffs on imports into India, leading to a significant increase in exports.
- Greater certainty for businesses when trading with India.
- Businesses could take advantage of any opportunities that arise from the UK’s exit from the European Union.
The UK government has said that it is committed to securing a free trade agreement with India and that would be “one of the most ambitious and comprehensive in the world”.
- DIT analysis shows a trade agreement with India could boost the economies of all nations and regions of the UK by up to £300m.
Why is this trade deal important?
Currently, India imposes high tariffs on imported spirits, with a 150% tariff on single malt Scotch whisky. This makes it one of the most expensive places in the world to buy Scotch whisky. However, under the new trade deal, these tariffs will be slashed, making it much cheaper for Indian consumers to buy Scotch whisky.
This could lead to a boom in demand for Scotch whisky in India, as well as other markets where high tariffs currently make the spirit prohibitively expensive. This would be great news for producers in Scotland, who are currently facing tough economic conditions due to the Covid-19 pandemic.
The UK Government is also hoping that the trade deal will lead to increased exports of other British products to India, such as cars. Scotch whisky exports to India were worth £134 million in 2019, and it is hoped that this figure will increase significantly in the coming years.
The UK-India trade deal is a golden opportunity for Scotch whisky producers to increase their sales and exports. The Scotch Whisky Association is encouraged by the progress of the trade talks and is hopeful that a deal can be reached soon. Any such deal would be a boost for the Scotch whisky industry, which is worth £4.5bn to the Scottish economy.
Why is India so important to the Scotch whisky industry?
Simply put, India is the world’s most lucrative whisky market by volume and value.
The market is worth an estimated £13bn, making it the biggest in the world. And whilst whisky sales have been declining in developed markets such as Europe and North America, they are growing rapidly in India. In fact, according to a recent report by the International Trade Centre, whisky sales in India grew by a staggering 15% over the last few years.
However, despite this clear desire for high-quality whisky, homegrown Indian single malts are the dominant force in the market. They account for around 70% of all whisky sales in India, with Scotch whisky only managing to claim a meager share of just over 12%. In fact, the homegrown single malt in India is booming, with sales rising by an average annual rate of 42%, compared to just 7% for imported Scotch.
The Indian whisky sector has always been somewhat controversial; the European Union refused to give the country’s whisky producers protected status in 2009.This was because Indian law states that to be classed as whisky, a spirit must be distilled from grain, and mature for at least three years in oak casks. However, many of the big brands use molasses or other sugar-based products instead of grain, and do not age their whisky for long enough. The result is a much cheaper product, which the Scotch Whisky Association says does not deserve to be called whisky! However, in recent years there has been a growing demand for premium Indian whiskies, and some producers are now starting to meet the EU’s standards.
Diageo, the world’s second-biggest alcohol company has launched its own brand of Indian whisky, called Godawan. This signals the importance of the Indian market to companies that already own a large share of the Scotch whisky industry.
India is already exporting its whisky
One of the traditional challenges for the Indian whisky industry has been the lack of grain diversity. However, this is changing as more companies are planting a wider variety of grains, such as wheat and rye. In fact, India is one of theworld’s largest producers of wheat. This has resulted in India starting to export its whisky to other countries, such as the UK. In 2004, Amrut Distilleries became the first Indian company to export whisky to the UK. They were quickly followed by Paul John and Rampur.
This change in the Indian whisky industry presents a unique opening for UK companies that can provide the much-needed technology and expertise to help Indian distilleries produce a world-class product.
With the right partners, UK companies can help take Indian whisky to the next levelhelping Indian distilleries improve their production processes and quality control measures. The prestige of being associated with a well-known UK company can help Indian distilleries attract more investment and grow their business.
A similar situation has already been explored with the international growth of Japanese whiskey. UK companies have been instrumental in helping Japanese distilleries market their product to a global audience and improve their quality. In fact, Japanese distilleries have been so successful in recent years that they are now starting to outsell Scotch whisky in Japan. Part of this success story involves Japanese companies working with UK-based businesses.
The trade deal between the UK and India could have a similar effect on the Indian brewing and distilling industry. By partnering with UK companies, Indian producers could improve their products and reach new markets. This would be a win-win for both countries, and it would help to build closer ties between the UK and India.
So, what does this all mean for the Scotch whisky industry?
Well, it could potentially be huge. If the UK and India can agree on a free trade deal, it would open up a whole new market for producers of Scotch whisky. This could lead to a significant increase in sales, as well as jobs and investment in Scotland.
Currently, the Scotch whisky market is worth around £500 million a year to the UK economy. A free trade deal with India could see this figure increase significantly, as tariffs of up to 150% are currently applied to Scotch whisky in India. Removing this tariff could triple the market share of Scotch from 2% to 6%. As the industry employs around 11,000 people in Scotland and supports a further 20,000 jobs in the wider economy, this would lead to a significant boost to Scotland’s economy.
It is clear that a free trade deal with India could be hugely beneficial for the Scotch whisky industry and the Scottish economy as a whole.
A golden step forward
The UK government has said that it is committed to securing a golden trade deal with India, and this should be a top priority in the upcoming negotiations.
Scotch whisky is just one of many products that could see a substantial increase in exports if a free trade deal with India can be secured.
Other sectors that could benefit include textiles, machinery, and automotive parts. It is estimated that a free trade deal with India could increase the value of UK exports by £13 billion per year. This would be a huge boost for the UK economy and would create thousands of new jobs. However, for the Scotch whisky industry, a golden trade deal with India would be particularly beneficial. A free trade deal with India would level the playing field and could lead to a substantial increase in exports of Scotch whisky to a huge and growing market.